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International Business Project

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International Business Project

Introduction

Saudi Arabia which is one of the Gulf Corporation Countries saw an increased market of the soft drinks in 2016 qualifying this line of production into an attractive field for investors and the government that relies on such companies for revenue generation. The sales expanded mainly due to several factors including a hotter Ramadan, and an increased number of pilgrims across the year. Furthermore, an increasingly younger population also contributes towards the increased demand for soft drinks. Presently, several companies focus on the production of soft drinks such as Juice, RTD coffee, RTD tea, sports drinks, carbonates, bottled water, concentrates, and Asian specialty drinks. The Dala Juice Factory in Riyadh that functions under the watch of the Arab Company for Modern Industries is an example of a leading operator in the soft drink industry. The company performs well locally but must it must expand to foreign markets to grow its revenues. The firm while expanding into the two regions needs to consider some of the factors that may inhibit it and must come up with quick ways of overcoming the challenges.

Brief Company Overview

Dala Juice Factory is one of the most promising and distinct manufacturers and sellers of long life juice products in the Saudi Kingdom. The company functions under the Arab Companies for Modern Industries operates alongside the Dala Water Factory (Arab Companies for Modern Industries).  The company’s mission is to achieve new heights when it comes to quality and taste, and also aspires to produce goods that do not pose any health complication. The company strives to achieve customer satisfaction and seems to follow the teaching by Suchanek, Ritchter and Kralova (334) that the firm stands a proper position of generating more revenue and even recording impressive outcome when the customer feels contended. Dala’s vision is to access every household through the healthy, innovative and safe products for the ultimate happiness of the buyers. The manufacturer aspires to uphold the values of its shareholders by building a strategic connection with its business partners as well as creating a working environment that is safe for all workers.

The company carefully selects the fruits it uses for the production to deliver quality to buyers. The juice manufacturer considers fruits to be the primary ingredient because of the richness of vitamins, antioxidants, minerals, fiber, and other vital nutrients that are available in the raw materials. Furthermore, the company uses fruits to achieve a healthy weight and to minimize the risk of diseases that come with consuming juices that are not up to standard. Dala also feels that the use of fruits gives its buyers the chance to choose from a broad category, especially with the packagings that come in different sizes and shapes.

The Market Potential of Tunisia

Tunisia is a Northern African nation that borders the Sahara Desert and the Mediterranean Sea. The country that whose population ranked slightly above 11 million people as of 2016 has several features that make it a potential market for the products from Dala. One of the factors that make this place a favorable market for the Saudi-based company is that the nation conducts its operations following the guidelines of the Sharia law which is the same as Saudi Arabia. Block (12) informs that 98% of the inhabitants of the North African country are Arabs with the largest percentage (99.1%) being Sunni Muslims. Minority groups such as the Jews and Europeans also form part of the population, but each team only constitutes 1% of the nation’s population (Block 13). The prevalence of the Sharia law makes the market a suitable one for the juices from Dala because the contracts would be following almost similar structures apart from slight alterations that differ based on the formulations of each state. The nearly identical cultures further make Tunisia a favorable market for the products by Dala because of the similarity in language whereby both nations consider Arabic to be the official language. The use of Arabic in both geographical regions is likely to facilitate interaction which is a fundamental business requirement. However, it would be difficult for the seller to attract buyers or even market its products if the two nations used different languages.

Other than the similarity in law that follows the Islamic pattern, Tunisia is a suitable market for Dala because of the increasing use of internet platforms to market goods and to interact with buyers. Even though the government was initially quite strict on censorship and legal sanctions following the guidelines of Ben Ali, Tunisians are now increasingly becoming active internet users, especially on the social media platforms and on business sites (Block 16). Local and international businesses only have to register their domains with appropriate Tunisian trademark to get the opportunity to sell through the internet. The availability of e-commerce sites is also likely to favor Dala that will use the opportunity to sell its products through the internet. Dala needs the internet because, with its kind of product (juices), it requires a selling mechanism that would call on many buyers to acquire the goods before they become inconsumable.

Dala can expand to Tunisia because of the availability of trading experts who offer reliable tips on how to make the business prosperous, especially when serving as a new international entrant. Dala, for example, is likely to benefit from the guidelines of the U.S. Commercial Service that assists thousands of organizations annually to engage in trade and other services. The Economic and Commercial Section of the United States’ Embassy in Tunisia’s capital collaborates with the U.S. Commercial Service station in Morocco to assist the U.S. and other global firms that wish to expand into the Tunisian market (United States, Department of State). The juice maker is likely to gain guidance on how to plan its trade, and may also get legal advice relating to shipping, certification, packaging regulations, and product standards. The direction will be of significant significant to Dala relying on the idea that it is making its first entry into the North African country and would need some directives on how to establish operations.

The Market Potential of South Korea

South Korea is an East Asian nation that consumes the Southern part of the Korean Peninsula and shares its border with North Korea, a heavily militarized country. The country that is known for its green environment serves as a suitable place for Dala to expand its activities because of several reasons (Hart 51). An attractive feature that may attract Dala to the region is the fast-growing economy that has maintained a positive trend since the 1950s (Hart 72). South Korea’s closeness to Japan and China gives it a better opportunity to engage in trading activities, thanks to the idea the citizens in the region consider business activities to be a fundamental part of the culture.

Other than the fast developing economy, the government is democratic thus proving a less risky environment for entrepreneurs. The country has a two-party system that allows for efficient decision-making, and cases of internal party feuds are rare. The current president, Lee Myung-bak, focuses on making progressive on the economy every year, and also seeks to make the nation a world leader in green technological operations. The democracy in this region is likely to make it easy for Dala to conduct its operations because as Click (563) brings out in his paper, strict governmental restrictions may derail the efforts of a business to venture into a new international market. A strict government, for example, may impose heavy taxes and may develop more stringent environmental regulations that make it difficult for global firms to operate in the region. However, the democracy provides room for internationalization which gives foreign companies better opportunities to conduct their operations in the area.

Dala may choose to move to South Korea considering the increased consumption of fresh juice in the East Asian nation. Information by Ibrahim indicates that the intake of fresh juice continues to escalate in Korea as more citizens in this region have become aware of the health advantages of consuming fruits. Convenient stores and supermarkets are now striving to different stock types of fresh fruit juices compared to the initial years when the shelves were reserved for juices made from fruits grown in the country such as blueberries and strawberries. Jong-Wan Kim of Wooyang Frozen Foods Company Limited who operates as one of the leading distributors and importers of fresh juice in the region implies that the demand of raw juices as expanded surpassing that of processed juices with the order being high among the middle-class consumers. Kim mentions that “the fresh juice market is increasing as more Koreans are choosing fresh juices over other soft drinks such as Coca-Cola. The increase in demand now makes it possible to access brands such as mangoes, pears, and apple juices that were rare some years ago. The increase in demand has a direct impact on the rate of production which enables the region to export the surplus to other foreign states. Dala, therefore, stands an excellent opportunity of making higher sales from its activities by moving into South Korea.

Dala’s Level of Competitiveness and Possible Hindrances to Competition

Before entering into the target markets, Dala must consider its ability to compete on the international fronts to avoid misfortunes that may befall the firm once it commences its operations. A practical tool that may help to understand the company’s ability to compete at the international scale is the VRIO approach that was created by Barney in 1991. Barney (100) asserts that an organization ought to ask itself several questions that may help it to determine whether it is likely to benefit from its resources. A critical review of the resources Dala uses to engage in the manufacturing process reveals that they are valuable and which put the company among the leading juice producers in the Saudi Kingdom. The maker sources its raw materials from some of the most beautiful suppliers in the region which depicts the value of these resources. The company also tries to hire employees who have advanced skills in the development process which further stresses the value of the resources the firm applies to conduct its duties. The value Dala attaches to its resources is likely to make it competitive because the buyers in the new markets are likely to consider the manufacturer as being in a position to produce customers’ wants. The company also strives to acquire rare resources because Barney (107) implies that firms are not likely to be competitive when many companies can access the materials. The company, for example, acquires fruits from fertile fields, and which are not affected by pests. The company believes that obtaining rare raw materials will help it achieve its mission which aspires to produce quality and tasteful products. Otherwise, the company would not be in a position to compete in the new markets if its raw materials are available to all operators in the sector.

Dala also strives to use resources that are costly to imitate and which are organized to add value which increases its chances of competing at a global level. Barney (109) argues that a resource is costly to copy when other players cannot easily substitute or buy it at a fair price. A company that has resources that others cannot easily afford has higher chances of performing well because it gains the ability to serve customers or produce goods differently from the rest that utilizes similar forms of going about the operations. The obvious feature that depicts the resources Dala uses as being costly to imitate is it hires qualified personnel who require higher pays to remain at the workstation. Finally, the resources at Dala are organized in the sense that the firm has systems, policies, organizational structures, and processes that determine their application. The company, for example, has an HR unit that oversees the functioning of the employees thus increasing its chances of carrying out organized works at the global markets.

The Saudi Arabian juice maker should also conduct a SWOT analysis to identify its ability to compete with other manufacturers in Tunisia and South Korea. A SWOT analysis according to the writing by Chermack and Bernadette (385) helps an organization to make maximum gains from its high points and to improve on how it handles its weak areas. A strength that can make Dala perform well in the target markets is its productions of a wide range of nectars and drinks. Some of the nectars that attract buyers include Kiwi & Lime Mint, Mango, Mix Fruits, Pineapple, Orange, Guava, Mango & Passion, Apple Nectar, Guava, Orange & Carrots, and Tangerine (Dala). The company’s production of high-quality products also appears to be a strength that can help the organization to perform well in the target regions. The weakness that may deny Dala the chance to perform well in the foreign markets is its lack of products other than the nectars and drinks. The firm would be in a better position if it ventured in other areas of production. The opportunity that Dala should use to become competitive at the global scale more people are turning to fresh juices because of their nutritional values when compared with processed products. The other weakness that may deny Dala the chance to perform well in the two markets is that the company is not familiar with operations outside the continent considering that it only supplies its products to a few nations in the GCC. Finally, the opportunity that may make Dala perform well in Tunisia and South Korea is that both regions welcome foreign investors and provide a humble working ground for such operators. The juice producer should make use of the opportunity to invest in these areas and to gain more revenues from the activities in these locations.

It is, however, fundamental for Dala to be aware of some of the issues that may deter proper selling of the product in the target market. First, it comes out in the writing by Block (20) that the population is growing at a slow pace following the 2011 revolution that sought to oust Dictator Ali. The political actions in the past also affected the economic growth which is taking place rather slowly than expected. The slow growth affected the sales of juices that recorded a 26% growth in the off-trade value but witnessed a 7% reduction in the trade-off volume sales. The Finance Law of 2016 further subjects all types of juices to a taxation of 25% which the problem is becoming more difficult to handle for the players in this industry now that the demand is going down.

It is also significant to look into some of the factors that may make it difficult for Dala to compete favorably in the East Asian country. First, the data by Euromonitor International (a) reveals that more South Koreans are becoming aware of the health issues that come with taking sugary substances which appears to be scaring many people from using the products, particularly during breakfast. Furthermore, even though the region continues to record increased demands for the products, the area has recorded lower trade sales over the past half a decade which seems to be a threatening factor the players in this region. The negative trade growth in the sector pose some challenges to teams that may wish to exploit foreign markets and may have no option but to maximum on the locality where the number of consumers appears to be promising. Unfortunately, being unable to make maximum benefits from the external markets limits the revenues a manufacturer may gain from its activities.

 

Competition

Dala should expect to encounter competition from some of the leading manufacturers in Tunisia and South Korea. The Saudi Arabian firm should expect considerable competition from Societe Nouvelle des Boissons Gazeuses that recorded the highest retail value of 47% (Euromonitor International). The private company in Grombalia that functions in the food and beverages sector focus on the production of both non-alcoholic drinks and fruit juices (ZAWYA) which puts it at a better strength compared with Dala that specializes in the production of juices. The company that started its operations in 1980 uses effective marketing techniques to woo its buyers which include internet marketing as well as issuing products at lower prices. The manufacturer also strives to be unique by packing its products in 1 and 1.5 liter bottles which are relatively larger than the smaller packaging used by Dala where the maximum carriage is one liter. The company is also making entries into the Western nations such as the U.S. and U.K which further gives it the ability to compete on a global scale. Dala is likely to find it easy to compete with the Tunisian firm because both companies focus on the production of fresh juice. However, Dala might have to struggle to take some portion of the market already consumed by Societe Nouvelle des Boissons considering that the latter operates in its home country. Dala should make close ties with the Tunisian-based company to understand how to win over the consumers in the North African state.

Apart from Societe Nouvelle des Boissons, Dala should expect a considerable amount of competition from Societe de Fabrication de Boissons de Tunisie (SFBT) in Tunis. The private firm has stations in at least 25 locations in the country and specializes in the production of multiple products. Other than the creation of mineral water, the firm produces a wide a range of juices, beer, and milk (Oxford Business Group). The company’s strength lies in the fact that it provides water, beer, and milk as opposed to Dala that only manufactures juice. SFBT’s focus on other areas of production may make it quite challenging for the Saudi-based firm to compete with the African nation which is also making entry into other African states such as Nigeria, Egypt, and Morocco (Oxford Business Group). Other than selling its brands such as Boga Soda, Marwa water, Safia water, and Cetia beer, the company retails products by international companies that produce products such as 33, Coca-Cola, and Stella Artois thus making it more problematic for Dala to compete with the producer and seller. Dala should use the opportunity to investigate ways of making ties with international firms as a way of diversifying operations and as a way of making entry into global markets.

Dala should expect some considerable level of competition from the East Asian nation and must develop ways of competing with the manufacturers that are already taking more substantial portions of the market. The Saudi-based company, for example, expects a considerable amount of competition from Lotte Chilsung Beverage Company Limited that continues to dominate the South Korean market for juices (Reuters). The company that started its operations in the 1950s and which has its principal office in Seoul relies on its strength which is the production of products that fall into two major categories. The company, unlike Dala that focuses on the production of juices, manufactures non-alcoholic beverages such as carbonated soft drinks, teas, coffee, mineral water, fresh juices, and soya. The team also deals in the production of alcoholic substances such as wine, Scotch Blue, and whiskey which gives it a broader opportunity to attract buyers (Reuters). Other than focusing on multiple productions the company has a broader workforce of about 5050 employees who serve in different capacities thereby making it easy to achieve specialization. The factor that may make it difficult for Dala to compete with Lotte is the latter’s investment in various areas of production and its manufacturing of a broad category of items. Dala should strive to learn how the South Korean company specializes in the production of a wide range of goods to get a chance of penetrating the market.

Dala may also face stiff competition from leading operators such as Del Monte Fresh Produce (Korea) Ltd. that operates from Seoul. The company focuses on the production, importation, and selling of fresh fruit juices of different types including bananas, kiwis, grapes, oranges, pineapples, lemons, and mangoes which gives it a strong market base. The company that serves as a subsidiary of the Del Monte (UK) Limited commenced its operations in the region in 1999 and has made significant strides in entering the market by producing high-quality products that pose a little health risk. Other than being an international operator and offering high-quality products, the firm’s president (Keun-Ho Kang) focuses on improved forms of marketing which largely make use of internet platforms including social media that makes it possible to attract more consumers. It may be difficult for Dala to compete Del Monte considering its firm position in the global market but the Saudi firm may take advantage of its new forms of production that borrow from the Islamic world. Dala stands an opportunity for learning how to enter into foreign markets considering Del Monte’s comprehensive coverage of the global market.

Entry Strategies

Dala must settle on the suitable entry strategy in each case to avoid any inconveniency that may occur as a result of choosing the inappropriate entry technique. The juice manufacturer should apply the foreign direct investment method in entering the Tunisian market considering that Saudi Arabia and the North African nation have some similarities and the investor’s chance if experiencing significant variations is low. Tunisia being a Muslim nation, for example, structures its law by the Sharia law which is the case in the Saudi Kingdom. A majority of the inhabitants of Tunisia are Muslims which is the same as Saudi Arabia, and these similarities may make it easy for Dala to fit into the Tunisian market. Forming a direct investment in the African nation, therefore, may not present significant hindrances that may lead to the closure of the company. Dala would run at a considerable loss should it invest in a location where the regulations are entirely different from the Saudi Arabian laws. The uncertainties that come with spending in a nation that adheres to business structures that differ with that of the home country may force Dala to use the exportation method when investing in South Korea. Information by UNCTAD World Investment Report of 2017 reveals that the rate of FDI in South Korea has remained relatively constant over the years (Banco Santander) indicating that not many foreign operators invest directly in the region. The report reveals that the levels of FDI reached $12.7 billion in 2013 which was the lowest since 1998 (Banco Santander). The low recordings is an indication that using FDI as the significant entry strategy into South Korea may not be as fruitful as sending goods to this region and developing a mechanism on how to supply to different markets.

Differences and Similarities in the Strategies

The firm would note some similarities and differences in the strategies it applies to go about its operations in the two markets. One of the similarities is that the team must apply some of the business tools that help organizations to perform well regardless of the place of work. The company, for example, must use the marketing mix technique and must apply Porter’s five forces analysis to understand how to penetrate the market and how to compete respectively. The team must also develop systems, processes, and regulations that would define how activities happen in both regions to act in an organized manner and to avoid confusion. The third way in which the work strategies may be similar is that Dala must develop means of achieving customer satisfaction which serves a fundamental role in attracting more buyers and making them feel like the organization cares for their requirements (Suchanek, Ritchter and Kralova 336). The differences may be evident in the way the team markets in both nations. The juice manufacturer, for example, may have to come up with Arabic and French adverts which are the primary languages in the North African state. The manufacturer, however, must come up with adverts that use the Korean language while marketing in the East Asian country.

Conclusion

Dala needs to expand into global markets if it wishes to reinforce its strength at the international scale and if it desires to generate more revenues from its undertakings. The juice maker should look at the factors that make Tunisia and South Korea potential markets before venturing into these regions. The team must also consider the features that would make it compete favorably at the global scale to understand how to approach the markets. The body in charge of the expansion program should also look into the factors that may hinder the juice maker from competing with the major players in the target countries. The organization must look into the strengths and weaknesses of the competitors in each state to be in an excellent position to enter both regions. Finally, the juice manufacturer should adopt a practical entry strategy that would be suitable for both markets considering that the markets present different features.

 

 

 

 

 

 

Works Cited

Banco Santander. South Korea: Foreign Investment.” Banco Santander, 2017, https://en.portal.santandertrade.com/establish-overseas/south-korea/foreign-investment. Accessed 12 December 2017

Barney, Jay. “Firm Resources and Sustained Competitive Advantage.” Journal of Management, vol. 17, no. 1, 1991, pp. 99-120.

Block, Marta. Tunisia. Heinemann-Raintree, 2012.

Chermack, Thomas, and Bernadette Kasshanna. “The Use of and Misuse of SWOT Analysis and Implications for HRD Professionals,” Human Resource Development International, vol. 10, no. 4, 2007, pp. 383–399.

Click, Robert. “Financial and political risks in US direct foreign investment.” Journal of International Business Studies, vol. 36, no. 5, 2005, pp. 559-575.

Dala. “Dala: The Healthiest & the Tastiest.” Dala, 2017,

http://www.dala.com.sa/en/about/about-dala. Accessed 12 December 2017

Euromonitor International. “Juice in Tunisia.” Euromonitor International, 2017, http://www.euromonitor.com/juice-in-tunisia/report. Accessed 12 December 2017

Euromonitor International (a). “Juice in South Korea.” Euromonitor International, 2017, http://www.euromonitor.com/juice-in-south-korea/report. Accessed 12 December 2017

Hart, Dennis. From Tradition to Consumption: Constructing a Capitalist Culture in South Korea. Seoul, 2003.

Ibrahim, Yzza. Korean Consumers Demand for Premium Quality Juices. Fresh Plaza, July 21, 2016,

http://www.freshplaza.com/article/160691/Korean-consumers-demand-for-premium-quality-juices. Accessed 12 December 2017

Oxford Business Group. “Food and Beverages.” Oxford Business Group, 2017,

https://oxfordbusinessgroup.com/overview/sfbt-food-and-beverages. Accessed 12 December 2017

Reuters. “Lotte Chilsung Beverage Co Ltd.” Reuters, 2017, https://www.reuters.com/finance/stocks/company-profile/005300.KS Accessed 12 December 2017

Suchanek, Petr, Ritchter Jiri and Kralova Maria. “Customer Satisfaction, Product Quality and Performance of Companies.” Review of Economic Perspectives, vol. 14, no. 4, 2014, pp. 329-344.

United States, Department of State. “Tunisia is Open for your Business.” United States, Department of State, 2017,

https://tn.usembassy.gov/business/getting-started-tunisia/us-commercial-service/. Accessed 12 December 2017

ZAWYA. “Societe Nouvelle des Boissons Gazeuses.” ZAWYA, 2017, https://www.zawya.com/mena/en/company/Societe_Nouvelle_des_Boissons_Gazeuses-13AqmiwoRwR6grdFZSWQ1tDxDN9qkhwaPd 12 December 2017

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